First, some perspective.
The Denver housing market is still terrific, as strong as any in the nation. In fact, on a scale of 1 to 10, we have been in the 9 to 10 range for overall strength and fundamentals for nearly three years.
Denver and San Francisco have been running neck and neck during 2015 as the top-performing housing markets in the country. And what do we have in common? Young, educated, highly employable workers and jobs for anybody who wants to work.
None of that has changed.
But there has been a change in the past 60-90 days, and it’s time to start exercising just a bit of caution.
I often tell people that the last place you want to go for real estate news is the Denver Post, because there is no real reporting there. The Post is good for reporting headlines from press releases put together by Zillow and Trulia. The Post is good at talking to the same five high profile Cherry Creek / Wash Park / Highlands-based agents who talk about their million dollar clients and the hottest new restaurants in town.
But the heartbeat of the market is found in much grittier places, on the street and closer to where most people live. The best way to gauge a market is to list a working class neighborhood home for sale and then watch what happens.
And what’s happening now is different than what happened in April or May. While the showings are still coming, the offers are not… at least not in the same numbers.
For example, I recently listed an estate sale home priced $10,000 to $50,000 below other recent sales in the neighborhood due to its overall dated condition. While it wasn’t being given away, it wasn’t priced near the top shelf, either.
Showings? No problem. Thirty five of them in four days, consistent with all the craziness we have come to expect in 2015. But the offers? Not so much.
Ultimately, we ended up with just three offers… a cash buyer, more than $30k below list, and two conventionally-financed buyers with smaller down payments.
But no over-the-moon offers, no escalators, and no one willing to waive the appraisal or let a portion of earnest money go hard upon acceptance.
I guess we have gotten so used to crazy that when normal comes along, we barely recognize it.
It is my belief that the frenzy we saw in the spring would have generated six to 10 offers on this home, but the late summer reality turned out to be something less.
I had a similar experience with a condo I listed downtown last month. Priced right, turnkey condition, an easy sale. And in one weekend, 14 showings… and just two offers.
I do think you can use this anecdotal information to judge a change in the climate.
Prices are high, the highest they have ever been. Sellers are squeezing this market for all it’s worth, so value is very hard to find. There is a lot of arrogance and greed driving things, and that type of market rarely sustains for long.
As we move into fall, buyers are becoming a bit more selective, a bit more patient, and a bit more willing to say no to properties that don’t check all the boxes.
It’s very possible that a slowdown is taking shape, and you have to start being a little bit more careful… whether you are buying or selling.
The fundamentals of the market are still strong – watch the unemployment rate, because that will tell you the overall health of the market – but it’s not like it was three to six months ago. And with the holidays coming, it’s likely to cool off further as the year winds to a close.
Homes are still selling, and buyers are still out there. But you’re going to have to look at things differently in 2016, because we are moving back toward a market where selling a home actually requires work and buying a home will once again be contingent on comps and actual value, not simply emotion and greed.